Mindtree Ltd (Q4 FY13)

India Infoline News Service | Mumbai |

Q4 FY13 dollar revenues for Mindtree were in-line with estimates (US$113mn v/s expectation of US$112.6mn).

CMP Rs849, Target Rs950, Upside 11.9% 
  • Q4 FY13 dollar revenues for Mindtree were in-line with estimates (US$113mn v/s expectation of US$112.6mn). The strong growth was on the back ramp-ups of deals won in the recent past with volumes growing 3.7% qoq (4.2% offshore and 1.1% onsite). Due to higher number of billing days, the realised productivity was down 1.4% sequentially. In rupee terms, revenues grew ~4% qoq to Rs6.1bn.

  • The key business segments of IT services and Product engineering services grew well posting a 3.1% qoq and 2.3% sequential growth respectively in dollar terms. Amongst the verticals, the growth was led by Manufacturing and retail (+8.3 qoq), others (+5.3% qoq) and Travel, media and services (+2.8% qoq). Within services, IMS continued to drive the growth (+8.3% qoq) followed by maintenance (+2.8% qoq). Discretionary service of package implementation also grew well at 15.4% qoq albeit on a lower base.  Growth amongst geographies was driven only by RoW (~66% of incremental revenues) which grew 19.8% qoq. From the clients’ perspective, US$20mn+ clients grew sequentially by one to 5 clients. Top 6-10 and the non-top 10 clients drove the performance growing 5% and 5.5% respectively.

  • The OPM performance for Mindtree was also in-line with estimates coming in at 19% (141bps sequential correction). Hiring was strong during the quarter with gross addition of ~1000 employees resulting in increased employee expenses (+160bps qoq as proportion of revenues) and lower utilisation (down 2.2% qoq). A leverage on the SG&A costs (+14bps qoq), on the other hand, supported the OPM. Higher than expected OI and in-line operating profits resulted in higher than estimated net profit of Rs789mn (versus expectation of Rs736mn). Net employee additions (+6% qoq) were strong as company hired 550 freshers in Q4 FY13. The reported attrition inched further down to 13.4% (15.1% in Q3 FY13).

  • Management’s qualitative guidance and commentary remained positive with an expectation of a better growth in FY14 than FY13. Improvement in outlook for PE services, decent deal wins in IT services space (driven by IMS) and overall improvement in spending behaviour of its client portfolio were the key reasons for the constructive commentary. An even distribution of growth versus (back-end loaded in FY13) and decent hiring (to hire 1700 in FY14) also add credibility to the guidance of a better FY14. On the margin front, sizeable headroom in margin levers (esp. utilization) should also help maintain the OPM if not improve. We keep our estimates largely unchanged (11%/6% dollar revenue/rupee earning CAGR over FY13-15E). Maintain BUY with 9-month TP of Rs950.

Result table
(Rs mn) Q4 FY13 Q3 FY13 % qoq Q4 FY12 % yoy
Net sales 6,124 5,901 3.8 5,257 16.5
Operating profit 1,163 1,204 (3.4) 985 18.1
OPM (%) 19 20.4 (141) bps 18.7 25 bps
Depreciation 155 151 2.6 168 (7.7)
Interest 1 2 (50.0) 3 -
Other income 1 212 (99.5) 11 (90.9)
PBT 1,008 1,263 (20.2) 825 22.2
Tax 219 275 (20.4) 136 61.0
Effective tax rate (%) 21.7 21.8 - 16.5 -
Adjusted PAT 789 988 (20.1) 689 14.5
Adj. PAT margin (%) 12.9 16.7 (286) bps 13.1 (22) bps
Reported PAT 789 988 (20.1) 689 14.5
EPS (Rs) 19.0 24.2 (21.3) 17.0 11.8
 Source: Company, India Infoline Research
 
Financial Summary
Y/e 31 Mar (Rs m) FY12 FY13 FY14E FY15E
Revenues (Rs m) 19,152 23,618 26,109 28,743
yoy growth (%) 26.9 23.3 10.5 10.1
Operating profit 2,930 4,860 4,812 5,484
OPM (%) 15.3 20.6 18.4 19.1
Reported PAT (Rs m) 2,185 3,389 3,855 3,828
yoy growth (%) 115.1 55.1 13.8 (0.7)
         
EPS (Rs) 53.0 82.3 93.6 92.9
P/E (x) 16.0 10.3 9.1 9.2
Price/Book (x) 3.7 2.8 2.2 1.8
EV/EBITDA (x) 11.9 6.9 6.4 5.1
RoE (%) 25.2 30.7 27.3 22.0
RoCE(%) 29.4 37.8 35.9
BSE 566.00 1.75 (0.31%)
NSE 566.55 0.95 (0.17%)

***Note: This is a NSE Chart

 

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